Pensions

Question 1

How is pension relief calcualted?

Answer 1

Extend the bands

e.g. extend the 20% band by 100/80*Contribution

So wants to contribute £32,000, the basic rate band will be extended to £67,500.

£67,500 = £37,500 + £40,000 (£32,000*100/80)

Question 2

Employer’s contributions to an employee pensions scheme (3)

Answer 2

• An exempt benefit for the employee (Remove from income in calculation)
• An allowable trading expense for the employer
• Made on a PAID basis

Question 3

What is the maximum pension contribution made by an individual the will attract IT relief?

Answer 3

Higher of:

1) 100% * relevant earnings (Taxable trading profits + Employment income)
2) £3,600

Question 4

What is the annual allowance for pension contribution?

Answer 4

£40,000 (Total of ALL contributions)

• Any unused allowance can be carried forward for three years and is used on a FIFO basis, after the current years allowance has been used.